Olam Group has reported patmi of $323.8 million for 1HFY2025 ended June 30, more than four times higher y-o-y at a 573.2% surge.

 

Revenue during the period rose 49.9% y-o-y to $15.3 billion, while reported operating profit (or ebit) rose 85.5% y-o-y to $708.7 million. Including Olam Agri, or &ldquo discontinuing operations&rdquo , ebit was up 35.5% y-o-y to $1.2 billion.

 

The group has declared an interim dividend of 2 cents per share.

 

The group announced on Feb 24 that it has agreed to sell its remaining 64.57% interest in Olam Agri to Saudi Agricultural and Livestock Investment Company (SALIC) in two tranches: 44.58% (Tranche 1) and 19.99% (Tranche 2) at the end of three years, post Tranche 1 completion.

 

Given the conditional 100% sale of Olam Agri has been approved by shareholders on July 4, Olam Agri, excluding entities to be retained by Olam Group, is classified as a disposal group with assets and liabilities held for sale and defined as &ldquo Olam Agri (discontinuing operations)&rdquo in the 1HFY2025 results.

 

The results of retained entities are included under the remaining Olam Group&rsquo s continuing businesses within the group&rsquo s consolidated results.

 

&ldquo We therefore present the full results for ofi and remaining Olam Group as &ldquo continuing operations&rdquo and consolidate only the profit or loss of Olam Agri (discontinuing operations) in its aggregate group profit or loss. This approach will be adopted until the sale of the 44.58% stake in Olam Agri is completed,&rdquo says Olam in its results release on Aug 14.

 

Excluding one-off items, core patmi (or operational patmi) grew to $327.1 million on improved performance by ofi and the remaining Olam Group.

 

Free cash flow to equity (FCFE) improved to negative $945.3 million from negative $5.4 billion this time last year due to &ldquo substantially lower&rdquo working capital deployment, says the group.

 

Net gearing increased slightly to 2.83 times from 2.60 times previously, due to higher working capital, leading to an increase in borrowings.

 

To-date, ofi has secured total loan facilities amounting to US$2.45 billion, while Olam Agri has secured total loan facilities totalling US$3.85 billion for refinancing of their existing loans and for general corporate purposes.

 

Following the announcement of the proposed sale of the remaining 64.57% stake in Olam Agri to SALIC, Olam Group has committed to &ldquo right-size&rdquo the remaining Olam Group&rsquo s capital structure by allocating approximately US$2 billion to &ldquo de-lever its balance sheet and make it debt-free and self-sustaining&rdquo .

 

The group had also committed to invest US$500 million of equity into ofi, which was completed before end-June.

 

The group has also committed to &ldquo responsibly divest and monetise&rdquo all of the remaining Olam Group&rsquo s assets and businesses over time and &ldquo progressively distribute&rdquo the net proceeds to shareholders via special dividends.

 

Separately, the group announced in April the sale of its remaining 32.4% stake in ARISE P& L for US$175 million and expects this transaction to close in 2025.

 

Olam Group co-founder and CEO Sunny Verghese says: &ldquo We delivered strong patmi growth on the back of operating profit growth in 1HFY2025 despite volatile and adverse macroeconomic and geopolitical conditions. We are encouraged by the steady progress achieved in executing our updated 2025 reorganisation plan to unlock value for our shareholders. Pursuant to the proposed sale of Olam Agri to SALIC and the plan to responsibly divest the assets and businesses of the Remaining Olam Group, our focus is to prioritise ofi and support its efforts in realising its full potential value.&rdquo

Olam Group&rsquo s current share price does not reflect its intrinsic or fair value, says the company in its response to shareholders&rsquo questions ahead of the company&rsquo s extraordinary general meeting (EGM) to be held on July 4. These questions were submitted by shareholders by June 26. Shares in Olam closed at 94.5 cents as at June 27.

 

According to Olam, the share price discount is likely due to several factors including a conglomerate or multi-business discount and a lack of adequate free float. The latter has also resulted in a lack of analyst coverage and &ldquo effective price discovery&rdquo .

 

&ldquo By listing ofi as a pure play, standalone entity or attracting new investors in the private market, we believe most of these factors that are currently depressing the share price could be satisfactorily addressed,&rdquo says Olam in response to why it is exploring an initial public offering (IPO) for ofi after the company is selling Olam Agri and monetising its remaining assets.

 

The company adds that it is not feasible to sell all of its business and assets at the same time to the same buyer and has planned to dispose of its assets progressively.

 

&ldquo Therefore, it is important for us to have full flexibility and optionality of pursuing capital raising options (both public and private) for ofi at a timeline of our choosing subject to market conditions to maximise ofi&rsquo s value,&rdquo reads the statement dated June 29.

 

Yet, the company was unable to give a concrete IPO date for ofi, only stating that the IPO was delayed due to regulatory considerations. Referring to its previous responses to shareholders&rsquo questions on April 20, Olam explained that the group was expected to invest US$500 million ($637.8 million) of equity into ofi in the next three to four months at the time.

 

&ldquo One of the objectives of this equity infusion is to provide greater flexibility to pursue various strategic initiatives to unlock the full potential value of ofi for Olam Group shareholders via both private and/or public routes, for example exploring a concurrent listing in Europe and in Singapore at an appropriate time,&rdquo said Olam on June 29.

 

&ldquo We have already demonstrated the value of this flexibility in the case of Olam Agri where we successfully concluded the value unlock through the private route when the IPO option was delayed due to regulatory considerations,&rdquo it added.

 

With regard to the IPO, Olam will continue to update its shareholders on the progress of the options being explored.

 

Sale of Olam Agri and its proceeds

On the sale of Olam Agri being in US dollars (USD), which has since weakened against the Singapore dollar (SGD) from 1.32 to 1.28, bringing the difference to around $70 million, Olam says it will receive the sale proceeds in USD.

 

The group also notes that its functional currency is in USD and its base financial statements are also stated in USD.

 

While the base USD are converted to and reported in SGD for statutory reporting purposes based on the prevailing USD/SGD rates and the depreciation of the USD will result in lower reported SGD values, this will not signify any loss of value, as any USD appreciation in future will automatically result in higher reported SGD values. &ldquo There is therefore no need to hedge for this purpose.&rdquo The company also has hedges for its material SGD obligations such as the repayment of its perpetual securities due in 2026.

 

In response to a shareholder&rsquo s question of Sunny Verghese and N. Muthukumar&rsquo s stakes in Olam Agri after the entity is sold, Olam only replied that both parties&rsquo stakes are not tied to their roles as group CEO and group chief financial officer (CFO) of Olam Agri. Verghese owns a 4.5% stake in Olam while Muthukumar owns 2.2 million shares in the company. Verghese will no longer be the group CEO and executive director but will remain as the group&rsquo s non-executive director on Olam&rsquo s board. Muthukumar will cease to be its group CFO, adds Olam.

 

On the appointment of its next group CEO, Olam says its new CEO will be &ldquo expected to drive value through responsible divestments of the remaining Olam Group&rdquo .

 

Olam Group&rsquo s wholly-owned subsidiary Olam Agri has secured a three-year US$1.85 billion ($2.39 billion) financing facility which has two tranches, a US$1.6 million conventional tranche and a US$250 million Islamic tranche.

 

Proceeds from the facilities will be applied towards general corporate purposes. For the conventional tranche, the senior mandated lead arrangers are Australia and New Zealand Banking Group Limited, Banco Bilbao Vizcaya Argentaria, BNP Paribas, ING Bank, Intesa Sanpaolo Bank, and Natixis. First Abu Dhabi Bank is mandated lead arranger.

 

For the Islamic tranche, the senior mandated lead arranger is Dubai Islamic Bank.

The disposal aligns with its updated reorganisation plan, says the agribusiness company

 

[SINGAPORE] Olam : VC2 +1.12% will dispose of its entire stake in port and logistics operator Arise P& L for a US$175 million consideration, as part of plans to reorganise its business and monetise one of its units. 

 

The agribusiness giant in a bourse filing on Thursday (Apr 17) said that it entered into a conditional sale and purchase agreement with Equitane DMCC to dispose of its whole stake in Arise P& L. This amounts to 161.1 million ordinary shares, or around 32.4 per cent of Arise P& L&rsquo s issued and paid-up share capital.

 

Olam will not hold any shares of Arise P& L after the sale, which is expected to complete by end-2025, subject to terms and conditions.

 

Arise P& L manages ports and logistics infrastructure projects in West Africa, including a mineral port and a general cargo port in Gabon, and a bulk port in San Pedro, Cote d&rsquo Ivoire.

 

The buyer, Equitane DMCC, is a Dubai-based long-term investment platform that creates sustainable solutions in Africa.

 

The proposed disposal is part of Olam&rsquo s updated business reorganisation unveiled on Apr 14. This includes plans to divest and monetise the assets and businesses of the remaining Olam group, one of three operating units carved out in the company&rsquo s earlier restructuring exercise in 2022.

 

It also announced plans to inject US$500 million into its other unit, Olam Food Ingredients (ofi), and to focus on its delayed initial public offering (IPO). This follows its announcement in February that it was divesting its Olam Agri unit for US$2.6 billion.

 

The US$175 million consideration is &ldquo attractive&rdquo as it represents a 7 per cent premium over the carrying value of the Arise P& L shares held by Olam as at Dec 31, 2024, the group said.

 

The shares&rsquo book value stood at around US$164 million as at December 2024, based on audited FY2024 accounts. This brings the excess of the estimated proceeds and gains from the proposed sale to about US$11 million, Olam said.

 

The group added that it will consider factors such as its future earnings, cash flow, capital requirements as well as other financial and business concerns when deciding on the use of the divestment monies.

 

It also said that the completion of the proposed sale is conditional, as it depends on the group and Equitane DMCC obtaining consent from multiple parties. They include the conceding authority of Cote d&rsquo Ivoire, the Gabonese Republic, and Societe Librevilloise Maritime, as well as shareholders of Arise P& L.

 

Olam said that it would make further announcements if material developments arise, and urged shareholders to exercise caution in dealing with its shares.

 

Business reorganisation, IPO plans

On Apr 14, Olam unveiled plans to invest US$500 million of equity into ofi and to deleverage its other unit &ndash the remaining Olam group &ndash for progressive liquidation, as part of its business reorganisation.

 

It intends to monetise the remaining Olam group by divesting all assets and businesses under the unit over time, and distributing the net proceeds to shareholders via special dividends.

 

This, along with the equity investment, will position ofi for growth and facilitate the resumption of its delayed IPO plans in both Europe and Singapore, the company said.